Bailout? No! Nationalization!

The recent failure of two great business icons of Wall Street, Lehman Brothers and Merrill Lynch, are highlighting again the role of the government in regulating business. But I wonder if we are using the right language to describe what we are doing.

All of the news media, even the progressive ones like Democracy Now!, are describing what the US has done for AIG, the giant insurance company, as a bailout. A quick check of the definition indicates that a bailout is only helping that company, albeit with huge infusions of cash and credit.

But the process of bailing out AIG ended up with it being owned by the US government, to the tune of 80 percent of the stock. You and I, the citizens of the US, now own AIG. That’s more than bailing out, where we loan money and they pay it back. We bought it.

And that’s nationalization. That’s a word that we use when we talk about countries like Mexico taking over foreign oil companies doing business within its borders. Why don’t we call it what it is?

Because it's socialism. People think that socialism is some sort of infringement on the rights of the individual, but at its most basic, it is the state owning the means of production. What’s happening then, is we are using a basic tool of socialism to save capitalism.

And it is always thus. Mixed-market economies balance allowing markets free reign (laissez-faire) and some sort of regulation. The ultimate regulation is ownership by the state. The fact that we've resorted to nationalization indicates how badly the markets have worked.

Markets are not gods, never mind what neo-liberal economists and politicians would have you believe. They are instruments of human society, designed to serve society. When they don’t work, you opt for the other option: planning. Even before the demise of AIG—which happens to be my life insurance company—the pendulum was swinging back to planning, more commonly known as regulation. AIG, and Fannie and Freddie before it, nationalizations all, will speed up the process. Socialists always have to save the capitalists from themselves, and they never say "Thank you."

Update:  We haven't actually bought AIG yet.  The BBC points out that we have the option to purchase up to 80 percent of the company.  Check out TomDispatch f you want a good history of finance regulation in the US.